Tech Musings:- S&P500 Quick update

 S&P500 is making an inverse head and shoulder formation as we can see in the chart. . The current up move form 1560 to 1618 has formed the right shoulder of the formation. I think we will see a breakdown in index from next week.

Most conservative target for this formation is 1515. This also coincides with long term trend line. 

 

More aggressive target for S&P500 is at 1480 levels. Traders can go short on S&P500 at CMP of 1606 with a stop of 1630 and target of  1515. I would guess the probability of this happening is more than 70%.

Tech Musings Interest rates

I have been very bearish on bonds and mentioned that in my previous post on 19^th December and reiterated my view on 29^th May 2013. US 10 year treasury yield has moved up sharply to 2.53% from 1.80%.

If we look at the given chart we can see that US 10 year yield is forming a large head and shoulder pattern. Actually two different head and shoulder pattern can be observed on charts. If the first pattern has to come true that US 10 year yield should spend some time consolidating at these levels and trading between  2.00 to 2.53 levels before it can finally breakout.

The third chart is a 10 year Italian yield chart. We can see that 10 year Italian government bond yield
has broken out of down trend and may move up sharply in days to come.

Similarly 10 year Spanish government bond yield has broken out of down trend and may move up
sharply in days to come.

 

Tech Musings - currencies

AUD has corrected sharply and is one of the weakest currencies.  I have been consistently bearish on AUD in my previous post on 21^st May 2013 and 3^rd march 2013. AUD which was trading at 1.02 in March has made a low of 0.9176, which is approximately 10% deprecation in less than three months.

If we look at the current chart of AUD we can see that it had done 38.2% retracement of the entire rise from the low of 0.65 to high of 1.11. AUD looks week on charts and I expect it to correct further but it may see minor pull backs before it resumes it downtrend. Ultimate target for AUD is around 0.85 or below.

The next chart is of CAD. CAD has been very reluctant to break above 1.05 levels. If we look at the given chart I think we are just nearing “Eureka moment” CAD may depreciate sharply from the current levels and move towards 1.20 levels by the end of 2014.

In my previous post on INR written on 21^st May 2013, I wrote that “Finally it seems that INR has given a break out. If we look at the given chart we can see that INR is clearly breaking out of long term consolidation which lasted almost 1 full year. I think finally INR is ready to resume its downward spiral and we will see it trading around 60 if not more by the end of this year.”

INR has deprecated almost 13% since then. If we look at the given chart of INR we can see that the deprecation in INR has been sharp as expected. I think that INR should consolidate between the range 56 - 60 for atleast few weeks before it can finally cross 60. Year end target for INR is at around 62 – 64 and long term target for INR is at around 70 – 72.

 

In the same post I wrote that “I think the rally in yen is overstretched and as we can see from the charts yen is trading near significant resistance. Yet I feel yen may have some more steam left and may move to 105 levels before it finally starts its retracement. As I have mentioned regularly, I am a long term bear on Yen and see it moving towards 112 and 120 levels in next few years.”

JPY almost topped out at those levels and fell to 94 which was almost 10.5% correction from the top of 103.8. If we look at the given chart of JPY we can see that it had done 38.2% retracement of the entire rise from sub 80 levels to high of 104.

JPY should consolidate between 91 -104 before it finally breaks out and move towards target of 120 or higher. Reader can go short on JPY at 91 – 94 and keep a stop loss of 84 and target of 120 with six to 12 months time horizon.

 

In my previous post on GBP I have mentioned that “If we look at the next chart we can see that GBP is consolidating in a symmetrical triangle and any breakout above 1.65 will take GBP towards 2 USD levels.”

But instead of a upward breakout GBP has broken down from the symmetric triangle pattern. The immediate target for GBP will be at around 1.40 levels.

Tech Musings :- Global Equity Index

The first chart is of DAX.  The index looks precariously close to breaking the long term trend which started in September 2011. Any weekly close below 7600 will see sharp fall.

The second chart is of Dow index. As we can see Dow has broken the channel and long term support for Dow is now at around 14000. Expect a sharp correction in Dow to 14000.
 
 

The third chart is a weekly chart of Hangseng Index. We can see that HSI has already broken below the trend line and is correcting sharply.

The fourth chart is of Korean Stock Index. KOSPI is forming a big head and shoulder pattern and any break below 1700 levels will see very sharp falls.
 

Fifth chart is of Nikkei. My call on Nikkei was almost prophetic. Readers may remember that on 22^nd may 2013 I wrote, “If we look at the given chart we can see that the rally in Nikkei looks over extended and upside in Nikkei from here is very limited. I think Nikkei won’t go above 16500 levels in near term without any meaningful correction.”  

Nikkei made a top of 15919 on 23^rd may just a day after my call and then crashed 12445 which is almost a 20% correction form the top.  If we look at given chart of Nikkei we can see that it had completed 38.2% retracement at 12645 levels. Since global markets are looking week, Nikkei may fall further to 11800 levels.

 

In my same post I gave a buy call on Shangai composite with a stop loss of 2180. The index closed yesterday at 2074 levels and hit my stop loss. If we look at the given chart of Shanghai we can see that it is near to its long term trend line. Unless Shangahi breaks below 1950 levels on weekly closing basis further correction shall be ruled out. In fact it may become attractive buy at 2000 – 2050 range with a stop loss of 1920 on weekly closing basis.

 

The next chart is of Taiwan stock exchange. As we can see the index has broken long term trend line support and may fall to 7200 levels.

 

The last chart is UK FTSE 100 index. We can see that it is trading very near to its long term support of 6000. Any weekly closing below 6000 levels may see correction. 

In the same post on 22^nd may 2013  I gave a buy call on gold at 1340 – 1360 levels with a stop loss of 1290 and a target of 1500. Gold yesterday made a low of 1270 and has moved up from there. If you look at current chart of gold you can see that gold has done exactly 38.2% retracement of the entire rise from 300 USD an ounce to 1921 USD an ounce.

Gold has come precariously close to breaking my stoploss but risk reward point of view it also gives a very interesting buying opportunity. Readers may go long on gold at 1270 – 1290 levels with a stop of 1240 and target of 1400 + in next few months. 

I am not long term bear on gold but Gold may fall from here towards 1000 – 1200 range before it finally bounces back. Right now Gold has corrected very sharply from 1800 levels without any meaningful pull backs. I think pull back are imminent. Therefore current price point presents a compelling buying opportunity form risk reward perspective.

 

Tech musings

Readers may remember in my previous post on 29^th May 2013 I mentioned that, “S&P 500 may move up higher, but we are witnessing a buying climax in S&P500. It will peak out between 1700 – 1900 zone and then S&P should correct to 1500 level before moving up again.”

The first chart is a 240 minutes chart of S&P500. S&P has clearly broken the trend it was in since last six months. The trend started at 1340 and made a high of 1687.

The second chart shows us retracement for S&P500.  Since the index has broken below the first retracement level of 1606 the next target for S&P500 is at 1555 (38.6% retracement) and 1515 which is 50% retracement of the entire trend.

The third chart shows the long term trend line for S&P500 which is at 1515 levels which coincide with 50% retracement target. Therefore I think this is the most logical target for the current down move.  The probability for S&P to move below 1500 – 1480 seems low at this point in time.

 

If we look at the volatility index it has also broken out of a consolidation. Volatility index may move up to 35 – 40 from there which reconfirms my bearish view on market. 

The next chart is a monthly chart of Nifty. This chart shows the long term trend line which is supporting the market since 2003. If this trend line breaks Nifty is in for a big correction.  Market has pulled back from this trend line almost thrice. I am expecting this trend line to break sooner or later. If market gives a monthly closing below 5650 for two consecutive months I think Indian markets are up for some very serious corrections.

  

 

In the second chart we can see the retracement levels for nifty. If the trend line breaks the target will be 4950 and 4200. I know that I have been mentioning these seemingly impossible targets since long time but as per experience and knowledge these are the only logical targets no matter how impossible they seem at this point in time.

I would also like to mention that if the market ever come down to these levels that will be once in a decade buying opportunity for investors and the money invested at those levels will surely quadruple in next five years.